Review of Part C

1. Review of Part C Jim Gaa, Chair, Part C Task Force IESBA CAG Meeting New York, USA September 10, 2014

2. Background • March 2013: Project Proposal approved by IESBA. • Sept 2013: CAG reviews s. 370 • March 2014: CAG reviews s. 320 • July 2014: IESBA reviews s. 320 & s.370 • October 2014: Exposure Draft scheduled • January 2015: Begin Phase II (issues)

3. Changes from extant Code • Greater emphasis on non statutory information. • Intention is to maintain a strong requirement without being overly prescriptive. • The overarching requirement is to present information in a fair and honest manner. • And to provide guidance of meaning of fair and honest manner.

4. Meaning of fair and honest manner • No intention to mislead • Not omitting information • In accordance with an applicable reporting framework, and • Taking reasonable steps to: • Represent facts accurately and completely, • Describe clearly the true nature of activities, • Classify and record information in a timely and proper manner

5. Misuse of discretion • Board supported enhanced guidance on misuse of discretion but not too detailed, including a few examples. • Proposed categories : • Determining estimates • Selecting a particular accounting method • Determining the timing of transactions • Determining the structuring transactions • Determining disclosures

6. Changes from extant Code • Pressure now addressed in s.370. • Guidance on presenting non statutory information added. • Guidance on steps to resolve the matter if PAIB is associated with misleading information added. • Guidance on how to disassociate if information is still misleading added.

7. Section 320: Matters for Consideration • Do representatives agree the five categories of misuse of discretion and related examples (320.3) provide useful guidance to PAIBs? • Do representatives agree that the proposed approach to materiality and to the guidance relating to disassociation (paragraphs 320.6-320.8) is appropriate and helpful? • Do representatives agree that materiality is implicit within the term “misleading”? • Is the degree of prescription in the proposed revised Section 320 appropriate?

8. New Section on Pressure • Users requested more guidance on Pressure. • Section addresses pressure that could create threats to compliance with the fundamental principles. • Two requirements: • PAIB shall not allow pressure to result in breach of fundamental principles. • PAIB shall not place pressure on others.

9. Pressure: Practical Guidance • 370.5 provides factors a PAIB may consider in determining whether pressure could lead to a breach. • 370.6 provides actions a PAIB may consider if PAIB determines the pressure could lead to a breach. • The factors and actions may overlap, e.g. constructive challenge. • Board proposes a requirement to decline or discontinue activity, when pressure cannot be alleviated.

10. Pressure: Language of threats and safeguards • Diversity of views on Board on whether or not to use language of threats and safeguards in s.370. • TF considered merits of both views. • Large majority of Board agreed not to use language of threats and safeguards in s370.

11. Pressure: Matters for Consideration • Do representatives agree with the Board’s approach to drafting S.370 emphasizing clear guidance rather than in terms of threats and safeguards? • Are the actions a PAIB may consider when faced with pressure appropriate? • Are there any other actions a PAIB could take?

12. Phase 2: Inducements • Section 350 focuses on receiving offers. • TF plans to provide additional guidance when encountering the making of offers. • Without creating a “movable bar”, do Representatives have views about recognizing cultural diversity? • E.g., what is a gift and what does a gift imply or suggest? • Do Representatives know of useful sources of information or policy about Inducements?